Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Articles 36, 37 and 299(2) thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament⁽¹⁾,

Whereas:

1. A rural development policy should accompany and complement the market and income support policies of the common agricultural policy and thus contribute to the achievement of that policy’s objectives as laid down in the Treaty. Rural development policy should also take into account the general objectives for economic and social cohesion policy set out in the Treaty and contribute to their achievement, while integrating other major policy priorities as spelled out in the conclusions of the Lisbon and Göteborg European Councils for competitiveness and sustainable development.

2. According to the Treaty, in working out the common agricultural policy and the special methods for its application, account is to be taken of the particular nature of agricultural activity which results from the social structure of agriculture and from structural and natural disparities between the various rural areas.

3. The reform of the common agricultural policy in June 2003 and April 2004 introduced major changes likely to have a significant impact on the economy across the whole rural territory of the Community in terms of agricultural production patterns, land management methods, employment and the wider social and economic conditions in the various rural areas.

4. Action by the Community should be complementary to that carried out by the Member States or seek to contribute to it. The partnership should be strengthened through arrangements for the participation of various types of partners with full regard to the institutional competences of the Member States. The partners concerned should be involved in the preparation, monitoring and evaluation of programming.

5. Since the objective of this Regulation, namely rural development, cannot be achieved sufficiently by the Member States given the links between it and the other instruments of the common agricultural policy, the extent of the disparities between the various rural areas and the limits on the financial resources of the Member States in an enlarged Union, and can therefore be better achieved at Community level through the multiannual guarantee of Community finance and by concentrating it on its priorities, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective.

6. The activities of the European Agricultural Fund for Rural Development (hereinafter the EAFRD) and the operations to which it contributes must be consistent and compatible with the other Community policies and comply with all Community legislation.

7. In its action in favour of rural development, the Community takes care to eliminate inequalities and to promote equality between men and women and non-discrimination, in accordance with the Treaty.

8. To focus the strategic content of rural development policy in line with the Community’s priorities and hereby favour its transparency, the Council should adopt strategic guidelines on a proposal from the Commission.

9. On the basis of the strategic guidelines, each Member State should prepare its rural development national strategy plan constituting the reference framework for the preparation of the rural development programmes. Member States and the Commission should report on the monitoring of the national and Community strategy.

10. The programming of rural development should comply with Community and national priorities and complement the other Community policies, in particular the agricultural market policy, cohesion policy and common fisheries policy.

11. To ensure the sustainable development of rural areas it is necessary to focus on a limited number of core objectives at Community level relating to agricultural and forestry competitiveness, land management and environment, quality of life and diversification of activities in those areas, taking into account the diversity of situations, ranging from remote rural areas suffering from depopulation and decline to peri-urban rural areas under increasing pressure from urban centres.

12. There is a need to establish general rules for programming and revising rural development programming, while ensuring an appropriate balance between the axes of the rural development programmes corresponding to those core objectives. The duration of the programmes should be of seven years.

13. To achieve the objective of improving the competitiveness of the agricultural and forestry sectors it is important to build clear development strategies aimed at enhancing and adapting human potential, physical potential and the quality of agricultural production.

14. With regard to human potential, a set of measures on training, information and diffusion of knowledge, setting up of young farmers, early retirement of farmers and farm workers, use by farmers and forest holders of advisory services and on the setting up of farm management, farm relief and farm advisory services as well as forestry advisory services should be made available.

15. As regards training, information and diffusion of knowledge, the evolution and specialisation of agriculture and forestry require an appropriate level of technical and economic training, including expertise in new information technologies, as well as adequate awareness in the fields of product quality, results of research and sustainable management of natural resources, including cross-compliance requirements and the application of production practices compatible with the maintenance and enhancement of the landscape and the protection of the environment. It is therefore necessary to broaden the scope of training, information and diffusion of knowledge activities to all adult persons dealing with agricultural, food and forestry matters. These activities cover issues under both the agricultural and forestry competitiveness and the land management and environment objectives.

16. The granting of specific benefits to young farmers may facilitate both their initial establishment and the structural adjustment of their holdings after their initial setting up. The setting-up measure should be made conditional on the establishment of a business plan as an instrument to ensure over time the development of the activities of the new agricultural holding.

17. Early retirement from farming should target a significant structural change of the transferred holdings through the measure for the setting-up of young farmers according to the requirements of that measure, or by transferring the holding with a view to increasing its size, also taking into account the experience acquired in the implementation of previous Community schemes in this field.

18. The use by farmers and forest holders of management and advisory services should allow them to improve the sustainable management of their holdings. At least, the use of farm advisory services, as provided for in Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers⁽²⁾, should help farmers to assess the performance of their agricultural holding and identify necessary improvements with regard to the statutory management requirements set out in that Regulation and to Community standards relating to occupational safety.

19. The setting up of farm management, farm relief and farm advisory services for farmers and of forestry advisory services for forest holders should help them to adapt, improve and facilitate management and improve the overall performance of their holdings by further enhancing the human potential operating in the agricultural and forestry sectors.

20. With regard to physical potential, a set of measures on the modernisation of agricultural holdings, improvement of the economic value of forests, adding value to agricultural and forestry products, promoting the development of new products, processes and technologies in the agriculture and food sector and in the forestry sector, improvement and development of agricultural and forestry infrastructure, restoring agricultural production potential damaged by natural disasters and introduction of appropriate prevention measures should be made available.

21. The purpose of Community farm investment aid is to modernise agricultural holdings to improve their economic performance through better use of the production factors including the introduction of new technologies and innovation, targeting quality, organic products and on/off-farm diversification, including non-food sectors and energy crops, as well as improving the environmental, occupational safety, hygiene and animal welfare status of agricultural holdings, while simplifying the conditions for investment aid as compared with those laid down in Council Regulation (EC) No 1257/1999 of 17 May 1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF)⁽³⁾.

22. Private forests play an important role in economic activity in rural areas and, therefore, Community aid is important for improving and broadening their economic value, for increasing diversification of production and enhancing market opportunities, in sectors such as that for renewable energy, while maintaining the sustainable management and the multifunctional role of forests.

23. Improvements in the processing and marketing of primary agricultural and forestry products should be encouraged by means of support for investments aimed at improving efficiency in the processing and marketing sector, promoting the processing of agricultural and forestry production for renewable energy, introducing new technologies and innovation, opening new market opportunities for agricultural and forestry products, putting emphasis on quality, improving environmental protection, occupational safety, hygiene and animal welfare, as appropriate, by targeting, as a general rule, micro, small and medium-sized enterprises and other enterprises under a certain size, which are better placed to add value to local products, while simplifying the conditions for investment aid as compared with those laid down in Regulation (EC) No 1257/1999.

24. In a context of increased competition it is important to ensure that the agriculture and food sector and the forestry sector can take advantage of market opportunities through widespread innovative approaches in developing new products, processes and technologies. For this purpose cooperation between farmers, the food and the raw materials processing industry and other parties should be encouraged.

25. Agricultural infrastructure and restorative and preventive measures against natural disasters should contribute to the agricultural and forestry competitiveness axis.

26. With regard to the quality of agricultural production and products, a set of measures on meeting standards by farmers based on Community legislation, encouraging participation of farmers in food quality schemes and supporting producer groups for information and promotion activities should be made available.

27. The aim of the measure on meeting standards is to promote a more rapid implementation by farmers of demanding standards based on Community legislation concerning the environment, public health, animal and plant health, animal welfare and occupational safety and the respect of those standards by farmers. These standards may impose new obligations on farmers and consequently support should be provided to help cover partly the additional costs or income foregone arising from these obligations.

28. The aim of the measure providing support for farmers participating in Community or national food quality schemes is to provide consumers with assurances on the quality of the product or the production process used as a result of their participation in such schemes, to achieve added value for agricultural primary products and enhance market opportunities. Since participation in such schemes may give rise to additional costs and obligations which are not fully rewarded by the marketplace, farmers should be encouraged to participate in such schemes.

29. There is a need to improve consumers’ awareness of the existence and specifications of products produced under the aforementioned quality schemes. Support should be provided to producer groups to inform consumers and promote products provided under quality schemes supported by Member States within their rural development programmes.

30. There is a need to ensure the smooth transition of a set of individual measures introduced through the 2003 Act of Accession, namely the measure on semi-subsistence farming and the measure on producer groups.

31. Support for specific methods of land management should contribute to sustainable development by encouraging farmers and forest holders in particular to employ methods of land use compatible with the need to preserve the natural environment and landscape and protect and improve natural resources. It should contribute to the implementation of the 6th Community Environment Action Programme and the Presidency conclusions regarding the Sustainable Development Strategy. Key issues to be addressed include biodiversity, Natura 2000 site management, the protection of water and soil, climate change mitigation including the reduction of greenhouse gas emissions, the reduction of ammonia emissions and the sustainable use of pesticides.

32. Forestry is an integral part of rural development and support for sustainable land use should encompass the sustainable management of forests and their multifunctional role. Forests create multiple benefits: they provide raw material for renewable and environmentally friendly products and play an important role in economic welfare, biological diversity, the global carbon cycle, water balance, erosion control and the prevention of natural hazards, as well as providing social and recreational services. Forestry measures should be adopted in the light of undertakings given by the Community and the Member States at international level, and be based on Member States’ national or sub-national forest programmes or equivalent instruments, which should take into account the commitments made in the Ministerial Conferences on the Protection of Forests in Europe. Forestry measures should contribute to the implementation of the Community Forestry Strategy. This support should avoid distorting competition and should be market-neutral.

33. Natural handicap payments in mountain areas and payments in other areas with handicaps should contribute, through continued use of agricultural land, to maintaining the countryside, as well as to maintaining and promoting sustainable farming systems. Objective parameters for fixing the level of payments should be laid down in order to ensure the efficiency of this support scheme and ensure that its objectives are achieved. Certain provisions of Regulation (EC) No 1257/1999 concerning support for less favoured areas should remain in force for a period of time.

34. Support should continue to be granted to farmers to help address specific disadvantages in the areas concerned resulting from the implementation of Council Directive 79/409/EEC of 2 April 1979 on the conservation of wild birds⁽⁴⁾ and Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora⁽⁵⁾ in order to contribute to the effective management of Natura 2000 sites, while support should also be made available to farmers to help address disadvantages in river basin areas resulting from the implementation of Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing a framework for the Community action in the field of the water policy⁽⁶⁾.

35. Agri-environmental payments should continue to play a prominent role in supporting the sustainable development of rural areas and in responding to society’s increasing demand for environmental services. They should further encourage farmers and other land managers to serve society as a whole by introducing or continuing to apply agricultural production methods compatible with the protection and improvement of the environment, the landscape and its features, natural resources, the soil and genetic diversity. In this context the conservation of genetic resources in agriculture should be given specific attention. In accordance with the polluter-pays principle these payments should cover only those commitments going beyond the relevant mandatory standards.

36. Farmers should continue to be encouraged to adopt high standards of animal welfare by providing for support for farmers who undertake to adopt standards of animal husbandry which go beyond the relevant mandatory standards.

37. Support should be granted for non-remunerative investments where they are necessary to achieve the commitments undertaken under agri-environmental schemes or other agri-environmental objectives, or where they enhance on-farm the public amenity value of Natura 2000 areas and other areas of high natural value.

38. In order to contribute to the protection of the environment, the prevention of natural hazards and fires, as well as to mitigate climate change, forest resources should be extended and improved by first afforestation of agricultural land and other than agricultural land. Any first afforestation should be adapted to local conditions and compatible with the environment and enhance biodiversity.

39. Agri-forestry systems have a high ecological and social value by combining extensive agriculture and forestry systems, aimed at the production of high-quality wood and other forest products. Their establishment should be supported.

40. Given the importance of forests for the successful implementation of Directives 79/409/EEC and 92/43/EEC, specific support should be granted to forest holders to help address specific problems resulting from their implementation.

41. Forest-environment payments should be introduced for voluntary commitments to enhance biodiversity, preserve high-value forest ecosystems and reinforce the protective value of forests with respect to soil erosion, maintenance of water resources and water quality and to natural hazards.

42. Support should be granted for restoring forestry potential in forests damaged by natural disasters and fire and introducing preventive actions. Preventive actions against fires should cover areas classified by Member States as high or medium fire risk according to their forest protection plans.

43. Support should be granted to forest holders for non-remunerative investments where they are necessary to achieve the forest-environment commitments or other environmental objectives, or in forests to enhance the public amenity value of the areas concerned.

44. In order to ensure the targeted and efficient use of land management support under this Regulation, Member States should designate areas for intervention under certain measures of this axis. Mountain areas and other areas with handicaps should be designated on the basis of objective common criteria. Therefore, Council Directives and Decisions adopting lists of less favoured areas or amending such lists in accordance with Article 21(2) and (3) of Council Regulation (EC) No 950/97 of 20 May 1997 on improving the efficiency of agricultural structures⁽⁷⁾ should be repealed with effect at a later date. Natura 2000 areas are designated in accordance with Directives 79/409/EEC and 92/43/EEC. Member States should designate areas suitable for afforestation for environmental reasons, such as protection against erosion, prevention of natural hazards or extension of forest resources contributing to climate change mitigation, and forest areas with a medium to high forest fire risk.

45. A penalty system should be set up where beneficiaries receiving payments under certain land management measures do not meet the mandatory requirements provided for in Regulation (EC) No 1782/2003 on all of their holding, taking into account the severity, extent, permanence and repetition of non-compliance.

46. There is a need to accompany changes in rural areas by helping them to diversify farming activities towards non-agricultural activities and develop non-agricultural sectors, promote employment, improve basic services, including local access to Information and Communication Technologies (ICTs) and carry out investments making rural areas more attractive in order to reverse trends towards economic and social decline and depopulation of the countryside. An effort to enhance the human potential in this respect is also necessary.

47. Support should be granted for other measures relating to the broader rural economy. The list of measures should be defined on the basis of experience of the Leader initiative and having regard to the multi-sectoral needs for endogenous rural development.

48. The implementation of local development strategies can reinforce territorial coherence and synergies between measures intended for the broader rural economy and population. Therefore, measures relating to the broader rural economy should be preferably implemented through local development strategies.

49. There is a need to clearly define the principles of coherence and complementarity of the axis for the improvement of the quality of life in rural areas and the diversification of the rural economy with other Community financial instruments, and particularly with those of cohesion policy.

50. The Leader initiative, after having experienced three programming periods, has reached a level of maturity enabling rural areas to implement the Leader approach more widely in mainstream rural development programming. Provision should therefore be made to transfer the basic principles of the Leader approach to the programmes building a specific axis in them, and provide a definition of the local action groups and measures to be supported, including partnership capacity, implementation of local strategies, cooperation, networking and acquisition of skills.

51. Given the importance of the Leader approach, a substantial share of the contribution of the EAFRD should be earmarked for this axis.

52. The EAFRD is to support through technical assistance actions relating to the implementation of the programmes. As part of the technical assistance referred to in Article 5 of Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy⁽⁸⁾, a network for rural development should be set up at Community level.

53. Provisions on the allocation of the available resources should be introduced. These resources should be consistent with the financial perspective for the period 2007 to 2013. The overall amount for rural development should be allocated annually. Significant concentration on the regions eligible under the Convergence Objective should be allowed.

54. Provision should be made for the Council to determine the amount for Community support to rural development under this Regulation for the period from 1 January 2007 to 31 December 2013, its annual breakdown and the minimum amount to be concentrated in regions eligible under the Convergence Objective in accordance with the financial perspective for the period 2007 to 2013 and the Interinstitutional Agreement on budgetary discipline and improvement of the budgetary procedure for the same period.

55. The annual appropriations allocated to a Member State for the Convergence Objective under the Funds for the part coming from the EAGGF Guidance Section, the Structural Funds, the Cohesion Fund (hereinafter the CF) and the Financial Instrument for Fisheries Guidance⁽⁹⁾(hereinafter the FIFG) should be limited to a ceiling fixed with regard to its capacity for absorption.

56. For the indicative breakdown of commitment appropriations available to the Member States criteria should be established according to an objective and transparent method.

57. Over and above these amounts the Member States should take account of the amounts pursuant to Article 12(2) of Regulation (EC) No 1290/2005.

58. The appropriations available under the Funds should be indexed on a flat-rate basis for programming.

59. The rate of the EAFRD contribution to rural development programming should be set in relation to public expenditure in the Member States, taking account of the importance of the priority given to land management and environment, the situation in the regions eligible under the Convergence Objective and the priority given to the Leader approach.

60. In order to mitigate the specific constraints and structural problems in farming and forestry activities and in adding value to agricultural and forestry products as a result of remoteness, insularity or distant location and of the dependency of the rural economy on a limited number of agricultural products, and to promote a robust rural development policy, specific provisions for certain rural development measures, as well as appropriate co-financing rates from the EAFRD should apply in the outermost regions referred to in the Treaty and the islands covered by Council Regulation (EEC) No 2019/93 of 19 July 1993 introducing specific measures for the smaller Aegean islands concerning certain agricultural products⁽¹⁰⁾.

61. In accordance with the principle of subsidiarity and subject to exceptions, there should be national rules on the eligibility of expenditure.

62. To ensure the effectiveness, fairness and sustainable impact of the assistance from the EAFRD, there should be provisions guaranteeing that investment-related operations are durable and avoiding this fund being used to introduce unfair competition.

63. Decentralised implementation of the actions under the EAFRD should be accompanied by guarantees relating in particular to the quality of implementation, the results, sound financial management and control.

64. Member States should take measures to guarantee sound functioning of management and control systems. To this end, it is necessary to establish the general principles and the basic functions which any management and control system should ensure. It is therefore necessary to maintain the designation of a single Managing Authority and to specify its responsibilities.

65. Each rural development programme should be subject to appropriate monitoring, by a Monitoring Committee, on the basis of a common monitoring and evaluation framework established and implemented in partnership with the Member States, to effectively meet the specific needs of rural development.

66. The effectiveness and the impact of actions under the EAFRD also depend on improved evaluation on the basis of the common monitoring and evaluation framework. In particular, the programmes should be evaluated for their preparation, implementation and completion.

67. To enable the partnership to function effectively and promote Community action, information on it should be publicised as widely as possible. The authorities managing the programmes have a responsibility in this respect.

68. Rural development as defined in this Regulation should be eligible for Member State support without Community co-financing. In view of the economic impact of such aid and in order to ensure consistency with measures eligible for Community support and to simplify procedures, specific State aid rules should be established, also taking into account the experience from the implementation of Regulation (EC) No 1257/1999. Moreover, Member States should be authorised to grant State aid, intended to provide additional financing for rural development for which Community support is granted, under a notification procedure in accordance with the provisions of this Regulation as part of programming.

69. There is a need to adopt rules to facilitate the transition from the existing support scheme to the new rural development support scheme.

70. The new support scheme provided for in this Regulation replaces the existing support scheme. Therefore, Regulation (EC) No 1257/1999 should be repealed from 1 January 2007 with the exception of certain provisions concerning less favoured areas which should be repealed at a later date.

71. The measures necessary for the implementation of this Regulation should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission⁽¹¹⁾.

72. The European Economic and Social Committee has delivered an opinion⁽¹²⁾.

73. The Committee of the Regions has delivered an opinion⁽¹³⁾,

HAS ADOPTED THIS REGULATION: